High court throws out $1B fraud verdict in Exxon leak case

(Lloyd Fox / Baltimore Sun )

February 26, 2013|By Arthur Hirsch, The Baltimore Sun

Maryland's highest court on Tuesday struck down the bulk of a fraud case against ExxonMobil Corp. stemming from an underground gasoline leak in Baltimore County, reversing most of $1.65 billion in judgments and dealing a stunning blow to hundreds of families.

In two opinions on cases arising from the 26,000 gallon spill in Jacksonville in 2006, the Court of Appeals tossed out claims of fraud and ruled that plaintiffs could not collect for emotional distress or the cost of medical care to monitor possible symptoms of illness.

The rulings reverse court victories secured by residents and businesses. The court rejected $1 billion in punitive damages from a $1.5 billion verdict handed down in 2011 after a six-month jury trial. The court also rejected some claims from a 2009 case in which a jury awarded $150 million to a smaller number of plaintiffs and ordered some returned to Baltimore County Circuit Court for trial.

"We're all still in a state of shock," said Susan Lazzaro, who lives with her husband, Robert, less than a mile from where the spill occurred at a main crossroads of Jarrettsville Pike, Paper Mill and Sweet Air roads. "We absolutely did not expect this. It leaves us with such a sense of defeat because we are still living with this nightmare."

Charlie Engelmann, a spokesman for ExxonMobil, said in an email that the company was pleased with the decision.

"The evidence showed that we acted appropriately after the accident and the court has agreed," Engelmann wrote. "We have apologized to the Jacksonville community and we remain ready to compensate those who were truly damaged by this unfortunate accident. We will continue the cleanup."

The court rejected all six claims of fraud the jury affirmed in 2011, including ExxonMobil's alleged willful deceptions of public officials and residents before and after the accident.

"Because we reverse the verdicts as to each of the alleged instances of fraud, the award to Appellees of punitive damages must be reversed as well," the court wrote.

The key claim of fraud was rejected for lack of evidence, although the opinion does say that ExxonMobil could have been more forthcoming with Jacksonville residents about their investigation and made fewer mistakes.

"That Exxon's efforts were imperfect, however, does not rise to fraud," the opinion said.

H. Russell Smouse, an attorney with the Peter G. Angelos firm, which represented plaintiffs in the 2011 case, said the lawyers were still evaluating the 129-page opinion and would be talking with their clients on "the issues to be pursued."

Smouse said lawyers were "still evaluating the avenues that remain available."

Attorney Stephen Snyder, who represented plaintiffs in the case decided in 2009, could not be reached for comment.

Residents of the suburban and rural community of Jacksonville, where residents are dependent on wells for their drinking water, reacted to the news with a mixture of disappointment and disbelief.

Lazzaro said her family is still not able to take baths, and they keep their showers to two minutes or less. They use only bottled water for drinking and cooking, and the backyard Jacuzzi has been empty for years. She said she and her husband were counting on the value of their home on Constantine Drive as a retirement "nest egg," and now it's not clear what it would be worth.

"You drive up and down Jarretsville Pike now and you see 'For Sale' signs everywhere," said Lazzaro, whose family was awarded $5.6 million in damages in the case decided in 2011.

Hans Wilhelmsen, whose family was awarded $13.9 million in compensation and $47 million in punitive damages — the highest damages award in that case — said he spoke with about 10 other plaintiffs during the course of Tuesday to share their thoughts about the decision.

"I think everybody was blown away," said Wilhelmsen. He said other plaintiffs he spoke with could not understand how an appeals court could reverse a finding of fraud made by a jury that heard evidence for months.

"That's the biggest question in everybody's mind," said Wilhelmsen.

He said he had counted on receiving the exact verdict sum, and knew it would be a long process before payment was made, but he had hoped the value of several properties he owns there would be recognized and compensated.

"Nobody was looking for some sort of enormous payout, but just to protect the asset," said Wilhelmsen, who said he installed a water filtration system in his home that cost $15,000, and about $3,000 a year to maintain.

Glen A. Thomas, president of the Greater Jacksonville Association, said of the verdict, "I guess I'm disappointed with some of it."

"I find it hard to believe there was not some fraud in the length of time the leak was taking place," said Thomas, who was the association president at the time of the leak. "For what people knew and how long the leak itself was going on, people knew something they were not revealing."

By the time the Exxon station was shut down in February 2006, a pressurized unleaded gasoline line had been leaking for 37 days. The leak caused by a contractor's drill on Jan. 13 actually set off an alarm immediately, but another contractor called to check on the station incorrectly decided there was no leak, and reset the alarm system so it could not detect the gasoline spill, according to the court documents.

No plaintiffs have claimed they became ill from exposure to gasoline contamination, but residents say they have lived with the fear of cancer and other illnesses for years. The court ruled the plaintiffs had not shown enough evidence of exposure to toxic chemicals to collect damages for emotional stress or for the cost of having their health monitored by a doctor.